China’s economy is “much” smaller than the US by what metric? China and the USA are the top two economies by any measure (GDP, exports, imports, etc.) with both countries switching places as 1 or 2 depending on the metric.
The difference between China/US in nominal GDP is much much greater than the difference in PPP. Secondly China is a known currency manipulator so I am inclined to pay less heed to the PPP. Finally the GDP per capita of China is absolutely dismal. Vast majority of the people there are not doing well and it's not a prosperous country. It's a third world country with vast majority of its citizens in poverty.
PPP GDP is much less affected by currency manipulation than nominal GDP, because the latter relies directly on the exchange rate.
> China is a known currency manipulator
The accusation has always been that they're suppressing the value of their currency (in order to boost exports), which would actually mean that their nominal GDP understates rather than overstates the size of the economy. Whether these accusations are true is a different question.
> It's a third world country with vast majority of its citizens in poverty.
It's certainly not a Third World country anymore (technically, this is a misuse of the term "Third World," but I'll go with it). GDP/capita in Beijing, Shanghai and Tianjin (China's 3 largest cities) is about $20k, which puts them roughly on the same level as the Czech Republic, Greece and Estonia, and just slightly below Portugal and Taiwan. Lots of Chinese cities are richer than these three (Shenzhen is at $32k/capita, similar to South Korea). On average, Chinese GDP/capita is about $10k, similar to Mexico and Turkey. That's pretty much average for the world.
There are certainly huge differences between different regions of China (Beijing is way more developed than a random farming village in the West of China), and there's enormous inequality within every part of China, so there are a lot of poor people. However, there are also a few hundred million people living what you would recognize as middle-class lives. That's why you'll see so many Chinese tourists these days at any random tourist destination around the world - they have the money to afford those sorts of luxuries now.
> Vast majority of the people there are not doing well and it's not a prosperous country.
Most Chinese people would agree with you that China is not yet "prosperous." Even the Chinese government officially agrees with you on that. They are doing vastly better than they used to, though, and the country as a whole is no longer poor. It's about average for the world now, but with a high growth rate and some highly developed regions in the East. Whether they make the final push into developed-country status remains to be seen.